Sunday, June 26, 2016

What does Brexit mean for EdTech?

I know of four successful EdTech entrepreneurs who voted for
Brexit. Surprised? Maybe not! I was one of them. Steve Rayson, another, made
the point that people in this position like to do detailed analysis, weigh up
the risks and make their choice. We were not swayed by Boris and co, and tended to see this as a long-term play, not a proxy general Election. Steve's point was that we are not scared of risk.
We rehearsed the arguments openly, online, over several months and made up our
minds. For all of us, I suspect, it was marginal. There was also some reflection
around what it means for our sector.

The Brexit vote has produced lots of angst around business. Die-hard
anti-capitalists have suddenly found a new interest in the stock market and
currency trading. They worry about tariffs and trade deals. But for those of us
who have been travelling and trading abroad for many years, it’s not such a
great problem.

1. Addressable
markets

EdTech companies tend to look towards the English speaking
market – the US, Australia etc, for the obvious reason that we speak the same
language. The EU market is linguistically diverse, compared to the largest,
single EdTech market in the world, the US. This is why investment money tends
to look for UK companies with a US angle. Content, technology and services are always easier to deliver in one language. Indeed, if one were to look for new,
hgh growth markets, it’s not Europe but the US, Middle and Far East that you would
turn. So in terms of growth, it’s business as usual.

2. M&A

Most of the M&A business is not investments from Europe or in European
entities but in the US, Australia and elsewhere. Similarly, a lot of investment is to and from the US. This has been true for decades and is unlikely to be much
affected by Brexit. Every single deal I've been involved in over the last ten years has had nothing to do with Europe.

3. Services

There are no tariffs on services, so it will not make much
difference. At present, few in EdTech experience any real differences between
selling to EU and other countries. If anything, Ireland, which is in the EU, is
the most difficult, as they subtract tax at source, which has to be reclaimed,
with some difficulty. So no difference here.

4. Education is
devolved

Education is a devolved responsibility in Europe. Pan-European
attempts at integration and sharing, Bologna and many others, failed, as
countries are, in reality, fiercely independent in education, with funding
regimes that encourage institutions not to share students and qualifications.
Being in or out, therefore, makes little or no difference.

5. Research

Little has emerged in EdTech from EU research funding. Many business people who have been involved in such projects complain about their bureaucratic
and stifling nature and lack of impact. As they have had no significant impact, despite vast sums
of money being spent, I don’t see this as something to worry about. Indeed, the
country saves large sums if wasted research cash, rather than being spent on diffuse,
collaborative, CityBreak research projects, get spent on closer working relationships
between researchers and our own UK-based EdTech companies. The EdTech sector in
the UK has not grown on the back of University research, it has grown through
the efforts of investors, entrepreneurs and small businesses.

6. Outsourcing

Few outsource from the UK to EU countries, as Indian or
other countries are cheaper, and often have higher level skills. Even if one
does outsource to Eastern Europe, things are unlikely to change.

7. Data regulation

Benedict Evans thinks that the EU is moving towards
heavyweight regulation around data (and AI) that will stifle technology company
growth, leading to inaction by buyers. The UK has pushed back against this but have
been outvoted Post-Brexit, the EU may get worse, while the UK remains
relatively light in such over-bearing restrictions. Being out may be an
advantage.

8. OER

Wikipedia, Duolingo, Khan Academy, MOOCs, and most
successful OER projects, are largely international phenomena, not EU specific.
Indeed, despite the huge spend in the EU, the most successful examples of OER
seem to come from the US. One wonders whether the steady flow of annual grants
has simply stifled innovation. I suspect so.

9. Currency

This is a swings and roundabouts issue. A weak pound makes
things difficult if you’re buying from abroad but also makes you cheaper and
more competitive to those abroad. As our EdTech industry is a net exporter,
this is fine.

10. Education

I covered this in another post but some analysis of the
effects of Brexit on the education market as a whole, shows no real,
significant change. When it comes to the ededucaytion market, the effects are insignificant.

Conclusion

So not much change then. If anything, a few advantages. One
clear advantage for me, is that we’ll rely less on the crutches of EU grants
and focus on real businesses and projects that effect real change in terms of
better efficiency and outcomes in the EdTech sector. We have the largest and
most successful EdTech market in Europe, it is more likely to grow as a result
of this vote.